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Posted by on Nov 3, 2006 in EVALUATING THE MONEY | 0 comments

Financial planning resources are easy to find (If you’re so rich, why aren’t you smart?)

On the Money From the November 3, 2006 print edition How many times have we heard (or said), “If you’re so smart, why aren’t you rich?” Whether it’s from a scholarly paper with the subtitle “an analysis of the asymptotic properties of Pareto optimal consumption allocations in a stochastic general equilibrium model with heterogeneous consumers,” or from the 1992 episode of “Batman” with the same title, somehow the connection between intelligence and wealth seems to make sense. It probably would be bad form to ask someone who’s very wealthy, “If you’re so rich, why aren’t you smart?” So where can we turn to test our personal store of smarts related to investing? Here are some readily accessible resources for building investment intelligence. The Securities and Exchange Commission provides a number of tools for investors. A helpful real-time quiz appears on the Web at www.sec.gov/investor/tools/quiz.htm. It’s a 10-question multiple-choice quiz that provides explanations for each answer. For example, “Over the past 70 years, the type of investment that has earned the...

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Posted by on Jun 3, 2005 in EVALUATING THE MONEY | 0 comments

You’d be surprised what can be used for collateral

On the Money From the June 3, 2005 print edition In May 2005, The Federal Reserve Board found that in the past three months, large banks have continued to ease their lending standards for commercial and industrial (C&I) loans. Current C&I lending standards are now comparable to those of the 1996-1997 period. On average, the 54 domestic banks and 19 foreign banking institutions surveyed said that credit lines, costs, spreads of loan rates over bank costs, and premiums on risky loans were all slightly more generous than they were in ’96-’97. Max Chafkin of Inc. Magazine reports, “The pattern is similar to the easy credit of 1996-197. However, that alone will likely not be enough to spur celebration among small-business owners, who continue to face a difficult period.” Still, the four “C’s” remain very much the standard for borrowers. Lenders will always review the borrower’s C’s: capacity, credit, capital and collateral. Here’s a creative examination of the last C, collateral. Collateral is an asset pledged to a lender until...

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Posted by on Feb 4, 2005 in EVALUATING THE MONEY | 0 comments

Seven ways to determine what your business is worth

On the Money From the February 4, 2005 print edition There are a number of reasons for valuing a business-sale or purchase of the entity, estate and tax purposes, and for raising capital. If a company is public, these valuation methods have nothing to do with the stock price. The worth of a business is based upon two major factors: the assets owned by the concern (tangible or intangible) and the income stream being generated by the firm’s operations. In other words, static property owned or continuing money flow from operations. Within those two broad categories, the seven methods below will facilitate constructing a reasonable value. Particularly in the high-technology industry, the value of a company may be based primarily on one specific static asset value; often the intangible asset is intellectual property. This approach is usually based upon the buyer’s desire for a particular intangible asset; frequently a new proprietary technology protected by patent or trade-secret. The price offered will reflect the buyer’s assessment (often not revealed to...

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Posted by on Aug 6, 2004 in EVALUATING THE MONEY | 0 comments

For election, listen to what candidates say about fiscal policy

On the Money From the August 6, 2004 print edition With the Democratic national convention commencing this week, we move into that period of time occurring every four years where political slogans and sound bites rain down– creating the proverbial great flood of ancient times. Insistent campaign promises, ranging from thoughtful to ridiculous will saturate our eyes and ears over the next several months. While much of the political process is the zealous gathering of support through emotional appeal, there is some quantitative basis underneath these rallying battle cries. Here’s a summary look at the theoretical relationships between government and money. The government has two major tools for achieving economic health: fiscal policy, through which it determines the appropriate level of taxes and spending; and monetary policy, through which it manages the supply of money. Since the Depression, the federal government has tried to create a combination of fiscal and monetary policies that will allow sustained growth and stable prices (no inflation). The primary tools of fiscal policy are spending...

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Posted by on Mar 1, 2003 in EVALUATING THE MONEY | 0 comments

Like Beauty, Assets– in the eye of the beholder

On the Money From the March 1, 2003 print edition The poet said, “Beauty is in the eye of the beholder.” What possible application would that soft and lovely expression have in the hard indifferent world of finance? It means a great deal when it comes to the relative worth, or “beauty” of your firm’s assets. Another related poetic phrase, though not nearly as engaging is, “One man’s trash is another man’s treasure.” We all have assets that are surely treasures to us. They are something beautiful that we hold. The American Heritage Dictionary provides the following definitions for assets: 1. A useful or valuable quality, person, or thing, an advantage or resource; 2. A valuable item that is owned; 3. In accounting, the entries on a balance sheet showing all properties, both tangible and intangible. Assets can include cash, stock, inventories, property rights, and goodwill. What are those assets worth? In the very end, after all the GAAPs, SAPs, FASBs, and other variations of accounting rules and statistical analysis, an asset...

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